“Token money was developed at an early date to shelter trade from the enforced deflations that accompanied the use of specie when the volume of business swelled. No market economy was possible without the medium of artificial money.”
In an increasingly interconnected world, where the internet has seemingly erased the borders between people on a global scale over the last several decades, it appears obvious in retrospect that internet-native forms of money and value would eventually take form.
This new reality began with Bitcoin in 2009 and its facilitation of peer to peer transactions. The launch of Ethereum in 2015 expanded upon this concept by enabling the development and deployment of smart contracts on chain that could interact with one another and which users could interact with as well.
Some contend that because there’s nothing tangible about BTC, ETH, and other forms of digital assets, that their value is questionable at best. The protracted crypto winter since late 2021 has further reinforced this stance among those that generally question the value proposition underlying this fledgling ecosystem of decentralized networks and the nascent economies being built on top of them.
Ethereum Stands Out
To date, Ethereum stands out as the blockchain network with the most development activity. Ethereum has also proven its robustness in terms of revenue generation that enables it to uphold a sustainable tokenomics model that pays its validators vis-a-vis a minimal viable issuance policy while correspondingly burning transaction base fees that its network users pay. In totality, these qualities have advanced the ultra-sound money meme that ETH is commonly associated with.
Despite the ongoing bear market, several observations may be noted from considering ETH’s price chart over the last several years:
$ETHUSD (Coinbase: Ethereum)
First, ETH has managed to close above the $1,000 level on the monthly timeframe since bulls first reclaimed it in January 2021 to kick off the most recent bull market, following its first and only prior monthly close above it in the previous bull market in January 2018. Although ETH traded below $1,000 in June and July last year, bulls managed to defend the $1,000 level and sustain monthly closes over it since then.
Next, ETH has essentially traded in a sideways pattern since The Merge was completed last September; ETH’s high that month was just under $1,800, about ten percent higher from its current price of around $1,600. This means that Ethereum’s successful transition to proof of stake consensus, and the implementation of staking withdrawals in April 2023, has effectively been ignored by market participants.
A Future for the Imaginative
“To manage an Ethereum account, you don’t have to have an identity, you don’t have to be a human being...a system, like GPT-4...can easily manage an Ethereum account...it’s entirely digital native.”
For the patient observer who is mindful of Ethereum’s transformative potential, like its possible business use cases as recently highlighted in a book entitled “Ethereum for Business” by Paul Brody, the Global Blockchain Leader at Ernst & Young, the present circumstances may rightfully be characterized as the calm before the storm.
As such, one may consider this period as an opportunity to gain exposure to ETH and learn more about the protocols with product market fit that are being built on top of it, while being considerate of the inherent and likely recurring volatility that is to be expected in participating in such an emergent asset class.
While this may all just be artificial internet money as some would say, the reality is that the emergence of digital native markets built on top of blockchain networks like Ethereum are ultimately enabled by it. Eventually, this artificial internet money may also become the preferred medium of exchange for artificial intelligence agents as well, and I personally think the broader market has not yet priced in such a paradigm shift.